address verification

The Role of Address Verification in Financial Services

Whether it’s opening a bank account, applying for a loan or submitting insurance claims, almost all financial services are now available online. It is convenient and makes the service provider more approachable but it’s also riskier for the customer and the service provider.

After all, it eliminates the face-to-face meets. Cases of impersonation and other such online fraud can result not only in financial losses but also in a loss of reputation. Companies that fall victim to financial fraud can try to recover their losses but according to a survey, half the respondents could recover only 25% of their losses.

Hence, fraud prevention is key. The good news is that you can protect yourself by taking measures like address verification. The importance of address verification for financial service providers is manifold.

The what and how of address verification

Address verification refers to the process of checking an individual’s street address against reliable third-party databases. This checks that the person who submitted the address is deliverable, it has an ongoing link with the address as a residential/ office address and is not linked to accounts flagged on any sanctions lists.

Address verification checks generate three types of reports:

  • Complete match

This refers to verification checks where the cardholder’s name and the street address provided are an exact match for the name and address stored on file

  • Partial match

In cases where the address is only an incomplete match, i.e. there is information missing or a typographic error in street names, pin code, etc. the verification tool will generate a partial match result.

  • No match

As the name suggests, this indicates a mismatch between the address provided and the address on file.

Using the rights tools lets you verify addresses with almost real-time results without inconveniencing the customer in any way. There’s no need to have agents physically visit addresses to verify them!

Address verification plays multiple roles for financial service providers. This includes:

It helps verify customer identities

Identity fraud affects 1 in every 15 people around the world. When a fraudster impersonates a customer, the financial service provider risks losing money and allowing these fraudsters to hack into their database. Address verification is a simple step that helps service providers verify customer identities.

It allows you to check that the street address provided by the customer is a valid physical location and linked to the name as given by the customer to verify their identity. Further, it protects the financial service provider from unknowingly dealing with people or organizations on international sanction lists.

It helps with risk assessment

Location plays an important role in risk evaluation for loans, insurance, and other such financial services. For example, insurance firms may charge a higher premium when insuring homes in flood-prone areas as compared to the premium payable for homes on a higher elevation. Similarly, in some countries, mortgage rates may vary from state to state.

By verifying the customer’s address, service providers can ensure that their assessment of the insurance premium or loan rate is accurate. They can then issue loans and insurance policies with appropriate premiums and protect themselves from being tricked by fraudsters.

It lowers the risk of being a victim of fraud

Reducing the risk of fraud is one of the major benefits of address verification. Let’s say a customer applies for a credit card. Address verification will help you check that the address is functional, linked to the individual and deliverable.

A fraudster may enter an address that looks legitimate but when checked emerges to be an empty parking lot! If a credit card was issued in this case, the credit-issuing company would stand to lose money with minimal hope for recovery.

Address verification can also be useful in identifying suspicious credit card transactions. 73% of all card payment fraud instances are connected to card-not-present fraud. By verifying the billing address used for a card transaction against the customer’s address stored on the issuing bank’s file, you can verify that the cardholder and the customer are the same person.

It aids in regulatory compliance

Complying with Know Your Customer (KYC) and Anti Money Laundering (AML) regulations is very important for financial service providers. Adding a step for address verification during the customer onboarding experience makes this simpler. In addition to verifying that the customer lives at the address provided, linking a person to a residence also helps ensure that the individual has stability and hasn’t simply set himself/ herself up at an address to launder money or commit other kinds of fraud.

It improves the overall customer experience

Apart from the reputation of a financial institution, it’s the customer service offered that influences customer loyalty. Studies show that banks that invest in improving customer experience grow 3.2 times faster than others. Address verification helps improve the overall customer experience in 2 main ways.

Firstly, customers who know the bank conducts stringent verification have more trust in the institution. This makes them more willing to share personal information that can be used to personalize their interactions. Secondly, having a verified address ensures that all bank postal correspondence is delivered to the right address with minimal risk of delay.

Summing it up

As more and more services go online and the associated human interactions become fewer, there’s an ever-growing need for financial service providers to know who they are dealing with. After all, your customer may not be in the same city or even the same state as the bank branch.

Address verification plays a critical role in customer verification and protecting the organization as well as other customers from fraud. It minimizes the risk of losses due to fraud and protects the brand’s reputation.

The availability of tools that automate this check and provide quick results helps balance the needs of verification with a smooth customer experience. It ensures that financial organizations not only have accurate data to work with but empowers them to deliver outstanding customer experiences that build loyalty.

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